End of $1B bond deal 'sets us back' on Driftwood LNG project, Tellurian says | TELL Message Board Posts


Tellurian Inc.

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Msg  41 of 48  at  9/26/2022 12:08:40 PM  by

jerrykrause


End of $1B bond deal 'sets us back' on Driftwood LNG project, Tellurian says

from SNL Energy Finance Daily
 

End of $1B bond deal 'sets us back' on Driftwood LNG project, Tellurian says

 
 
Byline: Corey Paul
 
 

Tellurian Inc.'s proposed Driftwood liquefied natural gas export terminal in Louisiana faces delays after the developer pulled out of a $1 billion high-yield bond sale, the company's Executive Chairman Charif Souki said in a Sept. 20 video address.

"We had to pull the financing that would have allowed us to stay on schedule to deliver LNG in the first half of 2026," said Souki, who co-founded the company. "Unfortunately, circumstances in the yield market with inflation and with uncertainty about what the Fed is going to do has created havoc in the debt markets."

Tellurian withdrew an offering of 11.25% senior notes and warrants, it said Sept. 19, citing uncertainty in the debt market. Tellurian's stock price dropped by nearly 24% on Sept. 20 to $2.97 per share. The company said in August that it planned to use proceeds from the offering to support the Driftwood facility.

"We were faced with doing a deal that we thought would jeopardize the balance sheet of the company, so we decided to pull it," Souki said. "It sets us back, definitely."

Tellurian has said for months that it was working to arrange the necessary financing to complete the Driftwood LNG project, which could produce about 11 million tonnes per year in its early phase before later expanding up to 27.6 Mt/y. In late March, the developer gave the go-ahead to its contractor to start limited construction at the site after saying it secured sufficient commercial support to finance the project.

Souki said Tellurian will focus on finding equity partners to finance Driftwood. The company has been in talks for several months with potential investors.

"Staying on schedule will become more difficult," Souki said.

Tellurian advancing Driftwood to construction would mark a new approach for developing a U.S. LNG project at a time when a flurry of commercial activity has supported the prospects of additional facilities. Tellurian's strategy of using 10-year customer contracts to cover the first phase of the project is a departure from the traditional approach to financing for LNG projects, which have typically had a repayment period exceeding 10 years. But Tellurian's agreements have raised questions in the market about the company's ability to obtain financing.

"The debt market made it very difficult to do a debt deal today, and we would never put in jeopardy the balance sheet of Tellurian to try to accelerate the process by taking disproportionate risks," Souki said.

 


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